Four miners has been expected to be picked up by a $6.4bn tracker fund.

The conspicuous falls suffered by a clutch of precious metals miners today served to highlight the influence exchange-traded funds wield on the London stock market.

Silver and gold producer Fresnillo recorded the biggest drop in the FTSE 100 and slid 153p, or 12.8pc, to £10.45. In the FTSE 250, Hochschild Mining lost 38.6 to 237.4p, a 14pc fall; African Barrick Gold declined 20.3 to 143.9p and Polymetal International cheapened 50 to 659½p.

One factor initially thought to have weighed on both Fresnillo and Hochschild was investor concern about proposals for a higher than expected tax on Mexican mining companies. All of Fresnillo’s mines are located in the country, while Hochschild also has operations in Mexico.

However, analysts and dealers pointed out that the 7.5pc mining levy was disclosed a week ago. Furthermore, neither Polymetal nor African Barrick have operations in Mexico and so would not be affected.

Market-watchers said the factor linking all four companies today was their failure to be included in the $6.4bn (£4bn) ETF called the Market Vectors Gold Miners ETF. Known as GDX, it is the biggest gold miner-focused ETF in the market and tracks the NYSE Arca index.

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If the miners had entered the underlying index later in the month, as had been expected by the market, their inclusion would have spurred significant buying pressure on the shares from GDX.

However, it emerged that, because the four precious metals producers had large controlling shareholders, they would not be included in the index after all and as a result would not be bought by GDX.

Hoping to profit from the uplift the miners experienced when the ETF began to buy, analysts said that hedge funds and other short-term investors would have snapped up the shares in recent days. Today, the surprise omission of the miners from the index prompted them to sell, pushing the share prices markedly lower.

In the wider market, the US Federal Reserve was always going to be the main driver of market sentiment this week but today it was not for the reason that many traders had expected. With the two-day meeting of Fed policy makers starting tomorrow and concluding on Wednesday, speculation about whether the Fed will announce a slow down of its quantitative easing programme was expected to keep many on the sidelines.

Instead, news that Larry Summers had pulled out of the race to became the next Fed chairman, making the dovish Janet Yellen the favourite to succeed Ben Bernanke, spurred a rally in global stock markets.

The FTSE 100 finished up 39.06 points at 6,622.86 and the mid-cap FTSE 250 advanced 71.94 to 15,292.03.

Like the precious metals miners, Wolseley also missed out on the broader rally, dragged 3p lower to £33.81 after the long-standing bulls at Credit Suisse advised that clients take profits, cutting the supplier of plumbing, heating and builders’ products to “neutral” on valuation grounds.

Analysts at the broker said they had held a positive stance on the company since October 2010 but could “find no reason to raise our already higher-than-consensus forecasts”.

Similarly, defence equipment group Cobham slid 7.2 to 294.1p on a downgrade to “hold” by Liberum Capital analysts.

“Guidance has recently been tapered with management now only seeing the 'potential’ for flat to modest growth in 2014,” they said.

“We forecast a modest decline,” the analysts added, noting that the antenna systems and tactical communications and surveillance divisions were “short-cycle” businesses, meaning there is a short time frame between orders and delivery which limits visibility.

Hopes that Prudential will unveil new financial targets at its investor conference on December 3 lifted the insurer 22p to £11.89. Panmure Gordon analyst Barrie Cornes noted that the last time the company set itself objectives, at a similar event in December 2010, the shares responded favourably to the move.

Those targets were expected to be reached by the end of this year and a new set may elicit a similarly positive reaction from the market.

Barclays also benefited from the attention of analysts and climbed as much as 2.8pc in morning trade. A so-called double-upgrade to “buy” from “reduce” at Nomura boosted the bank, a recommendation change that skipped out the intervening “neutral” rating altogether.

The experts at Nomura argued that Barclays’ UK operations and investment banking business will benefit from the recovery in the broader economy, which in turn will spur activity in the capital markets.

However, the bank finished the day off its best level following the publication of a trading update along with its rights issue prospectus, which, perhaps ironically in light of the Nomura note, raised concerns about recent trading at its investment banking division. Barclays closed 3.8 better at 305.4p.

Among the small-cappers, fuel systems developer Proton Power Systems surged ½, or 19pc, to 3.125p after its subsidiary SPower won an €857,000 (£714,000) project from Siemens, the biggest order it has yet secured with the German engineering giant. Encouraging first-half results pushed stockbroker and investment bank Shore Capital 1½ higher to 27p.

Finally, takeover excitement saw North Sea oil and gas explorer Bridge Energy jump 34½, or 28.3pc, to 156½p. Spike Exploration has offered to buy the Oslo and London-listed group for about 162p a share, a 32.8pc premium to Friday’s close.

The Telegraph Investor

Editor's comment:

Priced to be great value for new investors and those with large portfolios.